Technical Information Release

Technical Information Release TIR 99-9: Tax Treatment of Purchases with U.S. Government Bankcards

Date: 06/24/1999
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws

Sales and Use Tax

The purpose of this Technical Information Release is to explain the Department of Revenue procedures for administering the U.S. Government bankcard program. This Technical Information Release supercedes Technical Information Release 88-9 and modifies Administrative Procedure 101.2. This TIR is modified by TIR 01-21.

I. Introduction
As of November 30, 1998, the General Services Administration (GSA) announced a revised program for administering U.S. Government purchases made by federal employees with bankcards and/or other credit cards (GSA cards). The GSA has established an official U.S. Government bankcard program, known as the GSA SmartPay system, which replaces the Visa International Merchant Purchase Authorization Program (IMPAC). The GSA SmartPay system allows each federal agency to issue GSA cards to employees who are authorized to make certain government purchases on the credit of the United States. Federal employees can use the GSA cards for U.S. Government purchases of goods, within an authorized spending limit, and for authorized travel and lodging, meals, entertainment or for personal purchases. The Massachusetts Department of Revenue has agreed to participate in the GSA program.

II. Tax Treatment of U.S. Government Employee Purchases
Sales to the United States or its agencies are exempt from Massachusetts sales tax. G.L. c. 64H, § 6(d). Generally, in order to be eligible for the exemption, a sale must be directly to the United States or to a U.S. agency. If the credit of the U.S. Government is bound by a purchase made by a federal employee, the sale is exempt from Massachusetts sales tax. If the purchase is billed directly to the federal employee or is for personal use, it is not exempt from taxation.

In general, there is no exemption from the room occupancy tax under G.L. c. 64G, for federal or other governmental officers and employees unless the credit of the U.S. Government is bound. The rules governing room occupancy tax can be found in TIR 98-1. Thus, except as provided by G.L. c. 64G, § 12 (which exempts military personnel traveling on military orders), the excise continues to apply to occupancy by federal officers and employees on official business who themselves make payment for the occupancy, whether or not they are reimbursed by the federal government.

Purchases made with GSA cards beginning with the following prefixes are not exempt if the sixth digit is 1, 2, 3, or 4: 4486 (Visa/MasterCard), 4716 (Visa/MasterCard), and 5568 (Visa/MasterCard). These GSA cards are billed directly to the federal employee and purchases made using them are subject to taxation. All other GSA cards are billed directly to the federal government and their authorized use is exempt from taxation.

The Department of Revenue will accept the GSA card, with the appropriate sixth digit, as evidence that a particular sale is exempt under G.L. c. 64H, s. 6(d). The procedures are as follows. In order for a purchase to be exempt from Massachusetts tax, an authorized federal employee must present to the vendor the GSA card with an additional personal identification at the time of purchase. If the credit card system authorizes the sale, the vendor will charge no sales tax, but will otherwise treat the purchase as an ordinary credit card transaction. The words "U.S. Government Tax Exempt" will be imprinted on the vendor's copy of the sales receipt. The vendor must retain this receipt for the vendor's records. See 830 CMR 62C.25.1(4). No other substantiation is required for the Massachusetts sales tax exemption to apply to a U.S. Government purchase.

The Department of Revenue will continue to accept Forms ST-2 or ST-5 (or other appropriate government authorization) for U.S. Government purchases by federal employees, but those forms are not required with the GSA card with the appropriate sixth digit.

If you have any questions about the new Department of Revenue procedures, you may call or write:

Massachusetts Department of Revenue
Customer Service Bureau
200 Arlington Street

Frederick A. Laskey
Commissioner of Revenue

DOC # 76234
TIR 99-9

Table of Contents

Referenced Sources:

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